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On June 1, you borrowed $212,000 to buy a house. The mortgage rate is 8.25 percent APR with monthly compounding. The loan is to be repaid in equal monthly payments over 15 years. The first payment is due on July 1. How much of the second payment applies to the principal balance? (Assume that each month is equal to 1/12 of a year.) Solution EMI = $212,000 * (8.25%/12) * (1 + 8.25%/12)15*12 / [(1 + 8.25%/12)15*12 - 1] = $2,056.70 1st month interest = 8.25%/12 * $212,000 = $1,457.50 1st month principal = $2,056.70 - $1,457.50 = $599.20 2nd month interest = 8.25%/12 * ($212,000 - $599.20) = $1,453.38 2nd month principal = $2,056.70 - $1,453.38 = $603.32.

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- On June 1, you borrowed $212,000 to buy a house. The mortgage rate is 8.25 percent APR with monthly compounding. The loan is to be repaid in equal monthly payments over 15 years. The first payment is due on July 1. How much of the second payment applies to the principal balance? (Assume that each month is equal to 1/12 of a year.) Solution EMI = $212,000 * (8.25%/12) * (1 + 8.25%/12)15*12 / [(1 + 8.25%/12)15*12 - 1] = $2,056.70 1st month interest = 8.25%/12 * $212,000 = $1,457.50 1st month principal = $2,056.70 - $1,457.50 = $599.20 2nd month interest = 8.25%/12 * ($212,000 - $599.20) = $1,453.38 2nd month principal = $2,056.70 - $1,453.38 = $603.32

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